Inside the Market’s roundup of some of today’s key analyst actions
Barclays analyst John Aiken upgraded Manulife Financial Corp. (MFC-T) to “overweight” from “equal weight,” believing that its shares are undervalued relative to Canadian life insurance peers.
“Manulife Financial, in our opinion, has the greatest upside exposure to the improving global economy as the world emerges from the pandemic shutdowns. Further, it has the most leverage to higher rates and equities, which we believe is not adequately reflected in its valuation (6.9x consensus 2022 EPS, almost three turns below Sun Life Financial and more than 3.5x below Great-West Lifeco, and 1.0x price to book against 1.7 and 1.6x, respectively),” Mr. Aiken said.
He also expects an upbeat second-quarter earnings report: “While the comparisons from a year ago should be easy beats, we still anticipate that tailwinds will contribute to another quarter of sequential growth,” he said.
Mr. Aiken raised his price target on Manulife by C$1 to C$31. The average target among analysts is C$29.46, according to Refinitiv Eikon.
Scotiabank analyst Gavin Wylie upgraded International Petroleum Corp. (IPCO-T) to “sector outperform” from “sector perform,” citing the company’s solid financial results that he believes could result in an increase to its 2021 guidance.
While its strong cash flow levels will allow the company to pay off its debt in the short term, Mr. Wylie thinks it will permit share buybacks, dividends, acquisitions or an acceleration of growth at existing operations over the medium to longer term.
“As the front-month Brent futures contract has found footing around $70/bbl ... we estimate IPCO will continue to deliver an impressive DAFCF (debt-adjusted free cash flow) yield of 28% in 2021E and 33% in 2022E that sits well above its Canadian / International peer averages of 16% and 19%, respectively,” the analyst said in a note.
“With a significant number of the majors looking to increase divestments globally in the coming years and given the steady deal flow in Canada, we believe that IPCO is extremely well positioned to bid on attractive additions to its portfolio. We continue to see Canada as the mostly likely area to expand, but would not rule out Europe or lower risk assets in SE Asia (Malaysia / Vietnam),” he added.
Starting as soon as the fourth quarter of this year, and into 2022, “we place a relatively high probability that IPCO will instate some form of share buyback (normal course issuer bid) that could prove to be a near-term catalyst for the stock. We do not expect dividends to be a part of the near-term discussion given the likely preference to grow via M&A, however, IPCO remains cognizant of the fact that dividends will likely be required longer term to compete for investor interest,” he said.
Mr. Wylie also raised his price target to C$8.50 from C$6. The average analyst price target is C$6.81.
Several analysts hiked their price targets on MTY Food Group Inc. (MTY-T) following its upbeat earnings report last week and announcement that it plans to reinstate its dividend. Even though its shares rallied 17 per cent in the wake of the results on Friday, analysts still see some further upside.
MTY, the company behind more than 80 restaurant brands, reported a profit of $23-million in its latest quarter compared with a loss of $99.1-million a year ago when then pandemic started. The restaurant franchisor and operator, which had suspended its dividend last year when it the pandemic forced restaurants to close, says it will pay a quarterly dividend of 18.5 cents per share next month.
CIBC analyst John Zamparo hiked his target by $10 to C$74 and maintained an “outperformer” rating. The stock closed at $63.52 on Friday.
“MTY’s biggest U.S. brands—Papa Murphy’s (PM) and Cold Stone (CS)—are maintaining last year’s strength, while the Canadian recovery (-35% system sales vs. 2019) still has room to run. As well, costs removed during the pandemic have not returned,” Mr. Zamparo said in a note. “Potential upside is lower, in our view, following Friday’s +17% move, but we remain bullish as we do not believe the market has appropriately priced in a higher-quality U.S. business than in years past, combined with a pending Canadian recovery.”
Elsewhere on the Street, National Bank of Canada upgraded MTY Food Group to “outperform” from “sector perform” while raising its price target to C$72 from C$58. Scotiabank raised its price target on MTY to C$65 from C$57.50; Acumen raised its target to C$75 from C$70; and Raymond James raised its target price to C$64 from C$55.
The average analyst price target is now C$67.
Despite a 70 per cent surge in the share price of Cineplex Inc. (CGX-T) since the start of this year, TD analyst Derek J. Lessard still sees upside as economic restrictions lift. He reiterated a “buy” rating while hiking his price target to C$20 from C$16, citing the reopening this Friday of Cineplex’s Ontario venues, increasing vaccination rates, and pent-up demand for movies on the big screen.
The analyst said he expects several blockbusters later this year, given that many key titles were shifted from 2020. He noted premium video on demand, which allows customers to access video-on-demand content sooner than they would have been able to otherwise, has only had limited success despite many theatres being closed. “Consequently, we see very limited/modest changes in the historical box-office window,” he said.
“Starting in Q3/21, we are expecting attendance to build quickly, driven by increased vaccination rates, strong film slate, and limited PVOD disruption. As such, we believe that CGX shares offer compelling risk-adjusted upside from the current level,” he said.
The average analyst price target is C$14.
BMO Capital Markets analyst Phillip Jungwirth initiated coverage on Chevron Corp. (CVX-N) with an “outperform” rating and US$123 target price, which implies 25 per cent upside from current levels when including its 5.2 per cent dividend yield. His target is very close to the average on the Street of US$122.79.
Mr. Jungwirth is encouraged by the outlook for the company’s free cash flow and believes Chevron is in a strong position to increase cash returns to shareholders. He noted the company’s long track record of dividend growth and buybacks.
“Over the past six months, Chevron shares have lagged other upstream producers despite having similar cash flow leverage to higher oil prices,” the analyst said. “We think Chevron is in a strong position to increase shareholder returns and assume 5% dividend growth and a resumption of $2.4-billion in share buybacks beginning 2022.”
BMO’s Mr. Jungwirth also initiated coverage on Exxon Mobil Corp. (XOM-N), giving it a US$69 price target. But he’s less enthused on the company, giving it only a “market perform” rating.
“Exxon has a lot of momentum, although we think share price performance has reflected much of this. We currently see valuation, ability to increase cash returns, and cash flow leverage to higher oil prices as less attractive than Chevron or Conoco,” Mr. Jungwirth said.
“That said, we like Exxon’s leading upstream pipeline, which advantages it long term, and we could get more constructive on shares with a pullback,” he added.
In other analyst actions:
* Mayfair Gold Corp. (MFG-X): Eight Capital initiates coverage with “buy” rating and PT of C$2.20
* Richel.eu Hardware Ltd. (RCH-T): CIBC raises target price to C$45 from C$44
* Russel Metals Inc. (RUS-T): TD Securities raises target price to C$39 from C$37
* Stelco Holdings Inc. (STLC-T): National Bank of Canada raises target to C$54 from C$45
* Stella-Jones Inc. (SJ-T): National Bank of Canada cuts target price to C$52 from C$57
* Thomson Reuters Corp. (TRI-T): National Bank of Canada raises target to C$139 from C$128
* Wildbrain Ltd. (WILD-T): National Bank of Canada raises to “outperform” from “sector perform” while raising its price target to C$3.75 from C$3
* Triple Flag Precious Metals Corp. (TFPM-T): Raymond James initiates with “outperform” rating and C$24 price target.
* American Express Co. (AXP-N): Jefferies raises target price to US$170 from $145
* Bank of America Corp. (BAC-N): Jefferies cuts target price to US$40 from $43
* BlackRock Inc. (BLK-N): Jefferies raises target price to US$1001 from $899. KBW also raises target price to $952 from $885
* Citigroup Inc. (C-N): Jefferies cuts target price to US$80 from $85
* Nasdaq Inc. (NDAQ-Q): Jefferies raises target price to US$174 from $149. Piper Sandler also raises target price to $190 from $185.
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